Everything you need to know about starting a Debt Management Plan with MoneyPlus Advice.

A Debt Management Plan (DMP) is an informal way to manage your debts and pay them off with one affordable, reduced monthly payment.

Using our in-house Happy Home Calculator, we’ll create a household budget that works for your whole family and then split your debt repayment between your creditors.
Good to know: Debt Management Plans are not legally binding, and they aren’t guaranteed to stop bailiffs or further court action such as County Court Judgments. For a more comprehensive debt solution see IVA.

Good to know: Debt Management Plans are not legally binding, and they aren’t guaranteed to stop bailiffs or further court action such as County Court Judgments. For a more comprehensive debt solution see IVA.

Three simple steps to reducing your debts

  1. Set up
    After looking at your household costs and personal outgoings, our Happy Home Calculator will set out a monthly budget, and negotiations will begin with your creditors.
    Once repayment offers are accepted, your monthly payments will be distributed evenly between your creditors to repay your debts.
    MoneyPlus Advice will take care of all negotiations for you, and manage payment distribution on your behalf.
  2. Peace of mind
    We will review your Plan at least once every twelve months to make sure that your payments are still affordable for you.
    If your personal circumstances change and you need a review sooner, you’ll always be just a quick message away from expert support with one of our Friendly Advisors – we’re here to help you every step of the way.
  3. Plan complete
    Month by month, your payments will reduce your outstanding debts until they’re fully repaid. Once you’re done congratulating yourself, you can start rebuilding your credit score and move forward knowing that you have successfully overcome unmanageable debt.

Debt Management Plan Reviews

We think that MoneyPlus Advice offer the best Debt Management Plans on the market, but don’t just take our word for it! Read what our customers have to say…

Pros of a Debt Management Plan

  • Affordable monthly payments: We’ll help you work out your household budget and negotiate a lower, more affordable monthly payment, which we’ll then distribute to your creditors, minus our fee.
  • Debts fully repaid: If you complete your Plan, all the debts included will be paid in full and you’ll have extra money each month to save for the future.
  • Full control: Making one regular monthly payment allows you to have better control over your finances. If you ever need us, we’ll always be on hand to offer expert help and support.
  • Online Debt Management Plan: We give you access to your Debt Management Plan online so you can upload documents, review details and send us messages whenever suits you.

Cons of a Debt Management Plan

  • Freezing interest & charges: We do everything we can to reduce or freeze your interest and charges, but it’s not guaranteed. MoneyPlus Advice freezes interest on more than 85% of the debts that we manage.
  • Timescale: There are no set timescales with a DMP, and repayments can change depending on your circumstance. Paying less each month may take longer to clear your debts in full.
  • Fees: MoneyPlus Advice charges a fee for providing Debt Management Plans. This allows us to offer you the best service possible, and ensures that you don’t have the hassle of managing creditors on your own. Visit the Money Advice Service for more information on other DMP providers.
  • Priority bills: You must continue to pay priority bills as they cannot be included in a DMP, and failure to pay these types of debt could have serious consequences. For more information on which bills are priority bills, see our FAQs below.
  • Credit rating: Your credit file will show what debts are being repaid by a Debt Management Plan. Once the debts are repaid (or after a period of six years) they will be removed from your credit file, and you can begin to rebuild your credit score.

Frequently asked questions

What is a Debt Management Plan?

A debt management plan (DMP) is an agreement between you and your creditors to help you pay off your debt in affordable, monthly payments.

How does a Debt Management Plan work?

A DMP is usually set up and managed by a third party provider, such as MoneyPlus Advice – a fully regulated debt management company.

Before setting up your plan, we’ll work with you to put together a budget that explains how much you can afford to pay towards your debts after all your priority payments and living expenses have been covered.

You’ll then pay one monthly, affordable payment, calculated at a reasonable amount. We’ll then pass this on to your creditors, and take away the pressure of managing your debts directly.

What are priority and non-priority debts?

Priority debts have more serious consequences if not paid as they are usually secured against an asset, such as your home or car, and if not paid these can be repossessed. Other priority debts, such as council tax and TV licences, can lead to the individual being arrested if not paid. You can’t include priority debts in a debt management plan, so you’ll need to make sure you’re able to pay your priority debts before you set up a DMP.

Priority debts include:

  • Mortgage or rent arrears
  • Gas and electricity arrears
  • Council tax or rates arrears
  • Magistrates’ Court fines
  • Arrears of maintenance payable to an ex-partner or children
  • Income tax or VAT arrears
  • TV licence or TV licence arrears

Non-priority debts are less urgent. They include things like bank loans, credit cards, student loans, water charges and benefits overpayments.

Is a Debt Management Plan right for me?

Our expert Advisors will work with you to understand all your options. If a DMP is right for you, they will find a budget that meets your financial needs, with a portion of the money left over going to your creditors.

A DMP may be a good option if:

  • You are struggling to keep up with your outgoings each month
  • You’d like someone to manage/speak with your creditors on your behalf
  • You’d like to make one set monthly payment towards your debts that will help you to budget

If you’re unsure about whether a DMP is right for you, you might want to think about other options for dealing with your debts. Speak to our friendly team on 0161 837 4000, and we’ll help find the right solution for you.

Can you have more than one Debt Management Plan?

This is something that we wouldn’t recommend, as having more than one DMP won’t benefit you financially. If you have an existing DMP and need to include new debts on your Plan, speak with your current DMP provider to see if they can include the new debts.

At MoneyPlus Advice, we conduct yearly financial reviews with you, so if you gain any new debts after opening a DMP with us, then we’ll most likely be able to add these on to your Plan for you. However, this may increase your monthly repayments.

Can a Debt Management Plan stop bailiffs?

Bailiff visits can only be instructed by the court, and usually happen in the case of tax debts, court fines or business debts. It’s unlikely that you’ll receive a bailiff visit for unsecured debts, like loan, credit card or catalogue payments – unless you have defaulted on a County Court Judgement (CCJ).

Are Debt Management Plans legally binding?

No – a DMP is simply an informal agreement between you and your creditors for paying back your non-priority debts, and means you won’t need to deal with your creditors yourself. Because it’s not legally binding, you’re not tied in for a minimum period and can cancel it at any time.

Do creditors have to accept Debt Management Plans?

Creditors aren’t obliged to accept debt solutions however, they will most likely accept a debt management plan if they feel this is the best way for them to recover the money owed to them.

A DMP can’t force creditors to stop charging you interest on your debts however, MoneyPlus Advice has over 20 years of experience in these matters, and we’ve been very successful for thousands of customers in getting their interest and charges frozen, along with reduced payments.

How long does a Debt Management Plan last?

This depends on your monthly repayment amount, interest charges (if applicable), and your personal circumstance. The actual amount of time your Plan will last could change over time if your personal circumstances change.

For example, if your income increases, this could mean you’re able to increase your Plan payments and reduce the length of your Plan. However, if you cannot maintain the payments and have to reduce them, this will extend the length of the Plan.

What debts can be included in a Debt Management Plan?
DMPs are designed to help you pay off your unsecured debt at a more affordable rate. Unsecured debts could include things such as:

  • Personal loans
  • Credit cards
  • Catalogues
  • Store cards
  • Overdrafts
  • Disconnect services (such as an old mobile phone bill)

DMPs are not designed to include priority debts. These include debts that have been secured against your home and other assets, as well as utility bills. Priority debts excluded from a DMP are:

  • Mortgages
  • Secured loads/second charge loans
  • Hire purchase agreements
  • Council tax
  • Water
  • Gas
  • Electricity

Can you pay off your Debt Management Plan early?

DMPs are quite flexible, so you may find that you’re able to pay it off earlier by increasing your monthly payments or paying a lump sum.

If your personal circumstances change and you find yourself coming into money whilst on a DMP, our internal Settlements Team can help you to get an early settlement figure, which could mean that you’ll settle your debt for less.

Can you add debts to your Debt Management Plan?

Yes – we wouldn’t advise taking out any additional debts while on your plan, and we conduct yearly financial reviews with you to ensure that all your debts are included and your affordability is still the same. If you have gained new debts, or you forgot to mention an old debt when setting up your DMP with us, then we’ll most likely be able to add these on to your Plan for you.

What’s the difference between a Debt Management Plan and an Individual Involuntary Arrangement?
Both an Individual Voluntary Arrangement (IVA) and a Debt Management Plan (DMP) are solutions for those who are struggling with unmanageable debt, and both involve making reduced/affordable monthly payments to your creditors as part of an agreed plan.
The biggest difference between the two solutions is that an IVA is legally-binding and a DMP is not. With an IVA, once your creditors have agreed to its terms, they won’t be able to take legal action against you (such as petitioning to make you bankrupt, or other court action). They will also be unable to contact you directly – they’ll need to communicate through the licensed Insolvency Practitioner (IP) who is dealing with your case. IVAs also allow you to write off some of your debt, unlike DMPs.
DMPs are not legally binding, so your creditors can still take action against you if you do not keep up with your monthly plan repayments. They are also still free to contact you however, if you’re using an FCA-regulated Debt Management Company, such as MoneyPlus Advice, all contact with your creditors will be managed through this service.

Mortgages & renting.

Does a Debt Management Plan affect your mortgage?

If you keep up with your payments to your debts and your mortgage, a DMP should have no direct effect on your homeownership.

Can you get a mortgage whilst on a Debt Management Plan?

It may become more difficult to get a new mortgage while on a DMP, as the outstanding debts you have won’t be favoured on a mortgage application, and information about your debts on your credit file could go against you.

Can you re-mortgage whilst on a Debt Management Plan?

It could be harder to remortage when on a DMP, but there are options available. For example, if your mortgage deal expires, then your current mortgage lender may move you on to their standard variable rate (SVR). Whilst this isn’t usually the best deal on the market, it’ll mean your mortgage can continue with your current provider.

Can a Debt Management Plan stop me from renting?

Most landlords or letting agents will want to check your credit file when you apply to rent their property, so this may make renting while on a DMP more difficult. This is because the landlord or letting agent may be less willing to accept your application if you have missed payments or defaults on your credit history. However, they will need your permission to be able to access your credit file, and you’ll be asked to sign a form giving your consent first.

Some landlords and letting agents will only check public records, and not information from credit reference agencies. They don’t need your permission to do this, but this type of information will only tell them if you have a recent history of court action or insolvency; it won’t tell them about negative credit file factors, such as defaults or missed payments.

Local authorities and housing associations are unlikely to look at your credit history, and some private landlords or letting agents may still be willing to accept you as a tenant even if you have a poor credit history – but you may need to provide a guarantor with a good credit rating, or a pay a larger deposit (or rent) in advance.

Will a Debt Management Plan affect my current rental agreement?

If you keep your rent payments up-to-date and pay off any rental debts that you may have, then a DMP shouldn’t affect your current tenancy.

Good to know: Rent arrears are a priority payment. When starting a debt management plan with us, please tell us about your rent arrears so that we can include them in your monthly Plan payment.

Will a Debt Management Plan affect me if I own my home?

A DMP won’t directly affect your home if you own it outright however, it also won’t prevent creditors taking court action, which could still have an impact.

For example, a creditor could take court action to get you to repay a debt if you miss several payments towards it. This is known as a County Court Judgment (CCJ) in England and Wales, and a Decree in Scotland.

Securing the debt against your home is one option. This means that if you sell or remortgage your home, a portion of the sale will go towards paying off the debt.

Loans & credit.

Can you take out credit while on a Debt Management Plan?

Taking out further credit while on a DMP could be a breach of your Plan agreement, as you may not be in a strong enough financial position to make the minimum payments on the debts you already have.

When starting a DMP, our expert Advisors will help set up a monthly budget with you, which will account for all the regular day-to-day costs that are likely to pop up. We’ll make sure you are left with enough money to cover daily expenses, so there won’t be any need to borrow money to cover this.

If you do need to take out a new credit agreement, the lender will run a credit check. Due to the impact on your credit file of making reduced payments, you may be charged a higher interest rate for the credit you take out, or refused credit altogether.

Can you get car finance on a Debt Management Plan?

Whilst there are some car finance companies that accept those on DMPs, you may find that you’re seen as a higher risk by most. If you’re on a DMP, you should talk to your Plan provider before taking out any credit to buy a car, as it could affect your plan.

Credit scores.

Does a Debt Management Plan affect your credit rating?

A DMP will most likely have an impact on your credit rating, which could mean it may be more difficult to get credit in the future. This is due to the fact that you’ll be paying less than the minimum repayment amount you agreed to when you initially took the debts out.

What information could be put on your credit file while on a Debt Management Plan?
Creditors can request that a note be put on your credit file to say that you have a DMP, which may reduce your chances of getting credit (as it shows you’ve had trouble keeping up with repayments in the past).

However, if you’ve managed to keep up with payments on your debt management plan, the DMP would look better on your credit file than unpaid debts, or infrequent payments.

Creditors will usually make a note on your credit file each time a DMP payment is missed, or you pay less than the minimum amount on a debt.

Below are the different factors that can be included on your credit file:

  • Payment history. Any payments you’ve made towards your debts will have been logged on your credit file. DMP payments may be less than the normal debt repayment, but your credit history will still show that payments are being made towards the debt.
  • DMP flag. Whilst there isn’t a specific place in your credit file to say that you’re on a DMP, each account included within in your Plan can have a ‘flag’ added to it that shows repayments are being made through a debt management plan.
  • Defaults. If your account is defaulted by your creditor, they’ll add these details to your credit file, which will stay there for six years from the date it was entered. Although you might not receive a default for every debt on a DMP, it is very common for this to happen.
  • County Court Judgments (or Decrees). If you receive a CCJ (England & Wales), or a Decree (Scotland), details of this will be added to your credit file for six years.

How long will a Debt Management Plan stay on your credit history?

A DMP isn’t specifically mentioned on your credit file, but details of court action, defaults or missed payments will be removed after six years, even if the debt hasn’t been fully repaid.

Improving your credit score while on a Debt Management Plan.
When your debt management plan ends, you can improve your credit score by using credit sensibly, and paying it back quickly.

Your credit file will start to look a lot better once you have completed your debt management plan, and all negative information will be removed after six years (including if an account has defaulted).

Below are some positive steps you can take during and after your Plan to help improve your credit score:

  • Regularly check your credit report. This helps you to correct any misinformation or inaccuracies as soon as they appear.
  • Get registered on the electoral role. This will help future lenders verify your personal information quicker.
  • Pay your bills on time. Depending on how you pay for them, bills such as your gas, electric and mobile phone contract will appear on your report.